For the last post of 2021, I decided to write something different. What you will find in the following lines is what I think will be people’s financial life 10 years from now.
Many aspects of people’s lives – including social interactions and communication, ways of working, shopping – have been radically transformed over the last decade but many others are still largely similar to how they were in 2012. Among those, is people’s financial life. Financial interactions have moved on to new digital interfaces, instead of physical ones, but besides the facade not much really changed.
Well, I believe a real change will happen over the next 10 years, as the hundreds of billions invested by VCs in financial innovation will radically change the financial life of the masses.
The following post tries to imagine what this future will look like, 10 years from now.
The new normal
The most important thing I learned from one of my favourite podcasts – Exolore: facts based fictional world building – is that, when building predictions in a future world, you need to set some assumptions on what said future world will look like. So, what will the world look like in 2032?
Tech will be the new ‘establishment’. And it will be widely accepted, at any level of society. The tech industry will be recognized as the one with the strongest lobbying forces and people will generally have a bad perception of big tech. They will be the new evil corporations.
Engineers will be the new lawyers and doctors. Being an engineer will be the job that will guarantee the highest – and, more importantly, most predictable – income. Parents will want their kids to learn to code and to become coders. Engineers will be a substantial part of the global middle class, and they will probably earn 5-10x more than a non-technical worker.
Inequalities will be more significant than today, but social mobility will be higher, regardless of geographical location. The political division between a global liberal class and a sovereignist-protectionist one will become deeper. The inevitable clash between the US and China will be tangible and one of the major paradigms to read the world.
The concept of corporations will still exist, but it will be in a real crisis. The great resignation wave which started in 2020 never really stopped. More and more individuals started to see working for corporations as being vehicles for generating other people’s wealth. DAOs will be the operating system of the majority of new business ventures. And people will generally have multiple gigs in parallel. Flexibility – not stability – will be the key characteristic of the new workforce’s lifestyle.
Working remotely will be the rule, especially for qualified jobs. The concept of ‘office’ will be completely different.
There won’t be a distinction between real and virtual life anymore. Virtual life will be unanimously accepted as a part of real life, simply not corporeal. It will be another aspect of your life.
The financial ecosystem in 2032
As mentioned before, I expect that the financial life of people in this new world of 2032 will probably be one of the most different aspects of their life compared to 2021. To describe it, I will ask you to imagine with me the fictional life of John Doe.
John is 33, he’s from Bristol, United Kingdom, but lives in Thessaloniki, Greece. He works as a software developer. He has a wife, Francesca, and two kids.
He’s currently working with two organisations: one project is a DAO that curates digital art in hotels, the other one is a local gamers guild that is building a new game.
Both jobs are paid via streams of money: John receives a stream of EuroDAI in his ETH address. The sums received are automatically split by an automated robo-advisor which optimises John’s finances: 30% is automatically paid via a money stream to Mr. Genetakis, the landlord of the rented house where he lives, 10% is kept liquid and the rest is reinvested.
Being an avid comics reader, he has instructed the robo-advisor to invest 20% of his monthly income into a portfolio of NFTs created by independent comics studios. The investment is paying off: Timo, one of the NFT characters he owns, has gone viral in Indonesia when a cartoon for 10 years old kids was made around it. The rest of his income is invested by the advisor in a portfolio of tokens representing fairly safe assets: Bitcoins, Apple stocks, Maker Dao and Uniswap governance tokens, shares of the future Coldplay’s album, a basket of personal ISA (income share agreements) tokens from Stanford MBA class of 2029.
Over the last few weeks, John and Francesca, have been thinking about buying a house in the area – they like their life in Greece and their kids are very happy. So, after visiting multiple houses, they decided to buy a nice front-sea property: they agreed on the price and the landlord had already sent the contract to John’s ETH address. To finalise the transaction, John is looking for a mortgage online to fund his loan: he goes on an online loan aggregator, signs in with his ETH wallet and immediately all his assets are presented on the screen: the two active Superfluid money streams, the Github token that gives a proxy of his potential annual income, all his investment tokens – among them Timo, the NFT superstar – and also the token representing the house they want to buy.
After selecting the amount and terms for the mortgage, John is presented with a list of offers: he’s a good creditor, he always paid on time as his on-chain history demonstrates, his Github profile is extremely prolific – something very important for lenders nowadays – so he’s getting very good rates. The best offer comes from a lending originator in Dubai that is now expanding its portfolio to real estate in southern Europe: they will fund the mortgage entirely and want Timo (the NFT) and one of the money streams as collaterals.
After a brief call with his wife, they decide to accept the offer. John confirms the transaction with his hardware device and a magic swap happens: the EuroDAI land in the wallet of the property developer, the house token appears in John’s wallet and a popup comes up explaining that one of the money streams and Timo are now used as collaterals in a lending transaction and won’t be usable for future transactions. In addition, the mortgage is programmatically linked to the Github token, so that eventually other underwriters will know that John’s coding activities are supporting other lending transactions.
John and Francesca are now the owners of their dream-house in Greece. To celebrate they decide to go out for dinner, so they go to a local taverna and enjoy the night out. When it’s time to pay, John opens his wallet in his smartphone and pays, scanning the taverna QR code. The amount is immediately received by the host, who sends back on John’s wallet the receipt and a tokenized coupon for a future lunch. John decides to NFT-ize the receipt and post it in his on-chain museum: it’s a dinner to be remembered forever.
Major forces in action
The vision I just presented is based on a few core trends that will radically transform finance: financialization of everything, diversification of value storage, liquidity abundance and tokenization, data ubiquity.
FINANCIALIZATION OF EVERYTHING
Everything is becoming an asset class. Carlota Perez in Technological Revolutions and Financial Capital theorised how each new wave of technology expands the penetration of capitalism into new domains: each revolution incorporates new aspects of life into the market mechanism.
So each great surge represents another stage in the deepening of capitalism in people’s lives and in its expansion across the globe. Each revolution incorporates new aspects of life and of production activities into the market mechanism; each surge widens the group of countries that conforms to the advanced core of the system and each stretches the penetration of capitalism to further corners of the world, inside and across countries.Carlota Perez
This is currently happening with blockchain.
DIVERSIFICATION OF VALUE STORAGE
If capitalism touches new aspects of people’s life, the concept of value will necessarily be different: I suspect that in 2032 the concept of value will be much broader than what it is today. Today’s organisation of wealth for ordinary people revolves around money and some basic asset categories (stocks, real estate). This is very different for affluent spheres of the population who have access to a much more diversified range of assets. I believe this will become more common: value, and wealth, for ordinary people will be stored across a much wider array of assets than 10 years before.
The innovation that will enable the financialization of everything is tokenization. A token is a digital unique identifier of an object, represented in a computer system. Tokens are not new, APIs have been exchanging tokens for decades now, but the real innovation that the blockchain tokenization brings, is that blockchains’ tokens are natively integrated in online marketplaces or exchanges, where they can be converted into cash with minimal effort and no impact on price.
This consequently expands the property of liquidity – ease with which an asset, or security, can be converted into ready cash without affecting its market price – to a wider set of the assets, turning them into investable asset classes.
Last, but not least, the world is turning every day more quantitative. The amount of data that we produce is stunning: the world is estimated to produce approximately 79 Zettabytes of data in 2021, which means 79.000 Trillions Gigabytes.
Today only a fraction of this data is used at all, and probably even less is used by us. The ability of any human institution to leverage this massive amount of data will be a game changer, in basically every domain. Data ubiquity will allow many use cases, among them the ability to underwrite users instantly and more fairly: if you are a coder, your Github profile already provides more insights than your payslip, but your bank today is unable to consume it. In the future, probably they will. Same thing if you are a singer, Spotify streaming data should be the foundation of your credit score and it will probably be.
In the financial ecosystem I pictured above, I imagine two elements will be key over anything else: wallets and AMM exchanges.
In my opinion, wallets will become a central element of people’s life: they will represent a proxy for people’s identity, they will be the gateway to essentially every online transaction, they will store a wide array of tokens representing everything of people’s financial and professional life. And, eventually, much more.
AMM – Automated Market Maker – exchanges like Uniswap will be the greasy oil that will make the system run: they are the foundational mechanism that turns a tokenized asset into a liquid one, because they will seamlessly convert any token into a currency token.
I hope you find my predictions interesting, or at least entertaining. Nobody really knows what the future will look like, the only certain thing I know is that there has rarely been a time in history where people could impact the future as the one in which we live. Happy Holidays!
PS. If you want to discuss some of the scenarios or you are building some pieces of technology towards the future I described, please reach out to me: I will be spending more time on this topic in 2022 and I’m keen to talk.